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Tuesday, January 12, 2016

A Bothersome Credit Card Ad

Well, technically, it was an "advertorial" as stated in the news item itself.


The news article that disturbed me to no end is entitled Why It Pays To Have A Credit Card, which appeared on the website of ABS-CBN News. The link to the article itself labels it as an advertorial, and it also gives you a link to the BDO Credit Card site.

It is a short article (only three paragraphs), but from the get go, being a financial adviser, I could not let my frown go, after just the very first paragraph, which reads:

"Short on cash? No problem! In times like these -- when spending is inevitable -- having a credit card comes in handy."

The article mentioned "times like these," so I checked the date of posting, which was December 28, 2015. Add to that the phrase "when spending is inevitable" and one gets a certain understanding: this credit card ad was being positioned as your "back up cash" because, well, the season compels you to spend. And spend some more, even if you are "short on cash."

All of which are red flags, from a financial advising perspective.

First off, let me say that credit cards per se are not bad (or as my friend calls it, evil). The caveat being, if you use it wisely, deliberately, and pay the amount due in full. (Or have zero percent installments, though even that can be troublesome, but that is for a later discussion.) Credit cards also happen to have a lot of perks: most have a point system, some deals in hotels and restaurants can only be taken advantage of with a certain card company, and it definitely saves you the burden of having to carry wads of cash when you're purchasing a big ticket item like a household appliance.

Wisely, because you understand that a credit card is actually incurring debt. This is not a free-for-all gift certificate that you can swipe until the heavens fall down. This is something you need to pay back

Deliberately, because it means you have the means to pay it back on time, when it is due. You do not - or should I say, should not - use a credit card without knowing for certain how you are going to pay the bill once your SOA (Statement of Account) is mailed to you. By using the card, you should be essentially thinking of when you will be able to clean the slate.

And paying the amount due in full is the only way you can escape paying any late, finance or other charges. I remembered hearing a couple of young female professionals (they certainly looked nice) argue about getting a pair of shoes, and the one with the card rationalized aloud that "anyway, I just have to pay 5% daw (supposedly) of the amount swiped and I can still use the card!" That would mean that the interest levied would have the 95% as the base - there's no other word for that but foolish!

But that is exactly what the ad is perpetuating.

You don't have money, you are being pressured into buying things you can't afford, you don't want to look like a cheapskate in front of family and friends - ta-dah! Here's a credit card to "solve" your financial woes.

Frankly, I can't think of a worse time to avail of a credit card.

If you're short on cash, that already means you have some budgeting skills to brush up on. Adding debt to the equation can be the start of your downward financial spiral, since all you will be doing now is playing catch up.

If you still haven't bought them gifts by the 28th of December, I think it's clear to them that they're not on your Christmas list. Why fall for the marketing ploy and advertisements that portray you as inadequate or insensitive if you don't throw cash at your entire Facebook list this materialistic season?

Let me reiterate: credit cards can be useful. I've had to whip out my card because we had to make an emergency run to the emergency room, and the hospital needed a guarantee that someone would be able to pay. At tense moments like that, the last thing you need to be worrying about is where to find an ATM that will give you the amount of money being asked by the hospital. (And some banks have even lowered the amount you can withdraw daily, so this is a real concern when you need a larger amount ASAP.)

But completing your Christmas shopping list just to save face and appear generous - even at the expense of your financial wellness, who cares about the fact that you actually have no cash, I have to give them gifts, nakakahiya kaya (that would be embarrassing) - is recklessness that could cost you.


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